President Trump signed the Coronavirus Aid Relief and Economic Security Act (CARES Act) into law on March 27th. That Act included relief in the form of $349 billion for loans to small businesses through the Payroll Protection Program (“PPP”) administered by the U.S. Small Business Administration (“SBA”). The SBA initially described the PPP as a program “for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.”

Last night the Small Business Administration issued Interim Regulations relating to the Paycheck Protection Program (“PPP”). Although the CARES Act provides that any business is eligible for the PPP Loan Program, the Interim Regulations refers to 13 CFR 120.110 and the SBA “standard operating procedures” (SOP) 50-10 Subpart B Chapter 2. Both of those provisions make it clear that “passive businesses” are not eligible for CARES Act money. In that regard, 13 CFR 120.110 excludes:
“c) Passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds.” SOP 50-10 further states that “Businesses that are primarily engaged in owning or purchasing real estate and leasing it for any purpose are not eligible”, that “Apartment buildings and mobile home parks are not eligible”, and that “Residential facilities that do not provide healthcare and/or medical services are not eligible.”

As a result of the Interim Regulations, unless Congress changes the CARES Act to circumvent the Interim Regulations, Real Estate holding companies, Landlords, RE investors, HOAs, Co-Ops and Condominiums are not eligible for to receive PPP Loans.